Lago Agrio: Doug Cassel on the New Ecuadoran Judgment
Posted on November 19, 2013
Here is Letters Blogatory contributor and Chevron advocate Doug Cassel on the recent Ecudaoran judgment. I comment below the post.
To update the late Senator Everett Dirksen of Illinois, “$9 billion here, $9 billion there—pretty soon you’re talking real money.” In manipulating their $19 billion Lago Agrio judgment against Chevron (reduced last week to a mere $9.5 billion), Ecuadorian courts have proved to be no more serious than Dirksen’s quip.
Their latest performance is the November 12 ruling by a three-judge panel of the National Court of Justice (formerly the Supreme Court) slicing the judgment against Chevron in half. In a 222-page opinion, the National Judges declined even to consider extensive evidence that the plaintiffs’ lawyers and trial court judges colluded, through fraud, bribery and assorted chicanery, to stick Chevron with a $9.5 billion tab for environmental clean-up. On the other hand, the National Judges threw out the lower courts’ doubling of the award, through punitive damages unauthorized by Ecuadoran law, which were to have been paid only if Chevron declined to make a public apology. (Chevron declined the invitation).
Two aspects of context should be borne in mind in evaluating the new ruling. First, the National Judges sat, not as a court of appeal, but as a court of cassation. Their competence was thus limited to issues of law, not fact—such as the evidence of fraud. Further, their cassation review was technically only of the 2012 affirmance by an appellate court, and not of the original, fraud-infected judgment of the trial court. So the trial court’s bogus judgment against Chevron was doubly insulated from real scrutiny by the National Court. In contrast, the conditional award of punitive damages—a clear error of law by the trial court, affirmed by the appellate court in 2012—was struck down unanimously by the National Court.
One may reasonably question the independence and impartiality of the National Court panel. Like all 21 current National Court judges, they are brand new. They were named to the Court only in 2012 by a three-member “Transitional Judicial Council.” The Council was composed entirely of loyalists of Ecuadorian President Rafael Correa—who had previously praised the judgment against Chevron as the most important in the nation’s history. The Council was chaired, not by a lawyer, but by an engineer formerly on Correa’s payroll.
According to a prominent Ecuadorian law professor, quoted by former Ecuadorian Justice Minister Vladimiro Álvarez Grau in testimony for Chevron in the pending New York RICO trial against some of the plaintiffs’ lawyers, the “single objective” of the Transitional Judicial Council was “to capture the Judiciary on the Executive Branch’s behalf.” By January 2013, the mission was accomplished: “Now the whole Judiciary is captured. … [J]udges have been removed nationally, only to be replaced by judges belonging to Alianza País.” (Álvarez Grau testimony, ¶ 108 and n. 192.) (Alianza País—Alliance for the Country—is Correa’s party.)
In a post, Ted Folkman notes that, because Álvarez Grau is a political opponent of Correa, the objectivity of his assessment is open to doubt. Fair enough. But the same cannot be said of former Spanish Judge Baltasar Garzón. Precisely because he was viewed as an ideological sympathizer with Correa, Garzón was invited by Correa to join an International Oversight committee to evaluate the work of the Transitional Judicial Council. In a 102-page report issued in December of 2012, Garzón and his fellow overseers from Argentina, Brazil, Chile, Guatemala and Mexico, unanimously concluded that the highly subjective criteria used by the Transitional Judicial Council in interviewing candidates for the National Court could result in “arbitrary” and “unchecked” (“sin ningún tipo de control”) selections, thereby elevating to the National Court certain candidates in place of others who otherwise scored higher in the selection process. (Informe Final de la Veeduría Internacional a la Reforma de la Justicia en Ecuador, p. 58). They recommended that the National Court review the “genuineness” of its own selection process and hear objections from candidates who were excluded. (Id. at 99.)
The Garzón committee cited several examples of questionably seated National Court judges. One was the very judge who recently authored the National Court ruling on Chevron. Before his final interview with the Transitional Judicial Council, Judge Wilson Andino Reinoso had scored only in 33rd place, well out of the running for the 21 seats on the National Court. He had failed, as required, to submit for review any samples of pleadings or judgments he had written as a lawyer or judge. But in the interview—in which he touched on such favored Correa themes as the Incan Goddess Pacha Mama, and the right to water—Judge Andino was deemed a star. The Transitional Judicial Council awarded him enough points to vault past 15 candidates who otherwise outscored him. Even so, he barely limped onto the Court, finishing 18th among 21 winners.
The Garzón panel did not mention another aspect of Judge Andino’s qualifications—his brother is Mauro Andino, a Correa heavyweight in Ecuador’s National Assembly.
How did the Chevron case happen to be assigned to Judge Andino? We may never know. But the respected Vice Dean of the San Francisco University law school in Quito, Farith Simon, notes that this case assignment is one in a series of “suspicious coincidences,” in which judges who made it onto the National Court only because of favorable interview scores ended up being assigned to the cases of greatest interest to President Correa.
When I read the original $18 billion judgment entered against Chevron in 2011, one telltale sign of its illegitimacy was that it included $9 billion in punitive damages. From my work over the years on reparations for victims of human rights violations in Latin America, I knew of no legal authority for punitive damages in Ecuador, and no prior award of punitive damages in Ecuador.
One measure of the lack of integrity (or competence) of the 2012 ruling of the Ecuadorian appeals court against Chevron was its affirmance of this illegal award. The appeals court also affirmed the order making the punitive damages conditional—to be paid only if Chevron refused to apologize. That order, too, is unheard of in Latin America and unauthorized by Ecuadorian law.
The National Court panel has now unanimously agreed. Neither punitive damages, nor conditioning their cancellation on a public apology, are authorized by Ecuadorian law. Moreover—or so the panel thought—these remedies were in any event unauthorized, because the plaintiffs had not requested them. (In fact, evidence in the New York RICO trial suggests that plaintiffs not only requested, but granted themselves these remedies, by secretly drafting the judgment, which the trial court judge then signed as if it were his own. We shall see how the federal court in New York rules on this evidence.)
The National Court declined to consider the evidence of fraud. As a court of cassation, it could address only issues of law, not fact.
While that sounds plausible, the National Court rulings on mixed issues of law and fact turned on unsupported and erroneous assertions of fact. Article 76.7 of Ecuador’s Constitution guarantees the right of defense, including conditions of equality between the parties, access by both parties to all documents in the case, the right to reply to the arguments of the other party, the right to challenge or present rebuttal evidence to evidence presented by the other party, the obligation of expert witnesses to appear before the judge and to be interrogated, and, above all, the right to be heard by independent and impartial judges. If the evidence presented by Chevron had been considered and accepted, the conclusion would follow that these rights were systematically and flagrantly violated.
Granted, the National Court might arguably have abstained from finding a violation of the right to defense, on the ground that in cassation it could not consider issues of fact (such as whether the judge was bribed by the plaintiffs). But the Court instead made affirmative findings. Chevron, it ruled (p. 75 of the Spanish original, my translation) “has had access to justice, that is to say it has had effective protection of its rights and interests, without there being any obstacle to its exercise of the right to defense, and it has as well obtained a judicial decision in conditions of equality …” Yet the evidence in the New York trial makes these assertions laughable.
The National Court opinion bristles with defensive nationalist rhetoric. The judges lament, for example (p. 91, my translation), that Chevron “alleges the existence of procedural fraud, a very serious accusation made against the administration of justice, casting shadows of suspicion over the adjudicative function of Ecuadorian jurisdictional organs …” In reply, they assure us (p. 102), “The Ecuadorian State is a constitutional State of rights and justice, social and democratic, which guarantees a high level of protection of rights, as well as mechanisms to make effective every right consecrated in the Constitution …” President Correa would be proud.
The judges also contend (p. 96) that Chevron has had “decades of time” to pursue its allegations of fraud. In fact, most evidence of fraud became clear only after the trial court judgment in 2011, and even more, only after the appeals court affirmance in early January 2012. The blockbuster revelations of the last two years are thus subject to review only by cassation. And, as the National Judges repeatedly stress throughout their opinion, in cassation they cannot consider issues of fact.
The Judges (pp. 101-02) go on to lecture Chevron for not bringing its complaints of fraud to Ecuadorian prosecutors. Even if realistic, criminal complaints would afford Chevron no relief from paying the multi-billion dollar judgment. But in fact, any prosecutor who dared to cross Correa by calling into question the integrity of what the boss calls the most important judgment in the nation’s history, had better look for a different line of work. Even so, although the Judges either did not know or did not mention the fact, Chevron did send complaints to Ecuador’s national prosecutor. Unsurprisingly, they went nowhere.
I am not certain whether there is any further legal recourse theoretically available to Chevron in Ecuador. If there is none, then Ecuador is in violation of international human rights treaties requiring effective remedies—not cassation alone—for fraudulent judgments. But even if there is a theoretical Ecuadorian remedy before the Constitutional Court (another Correa fiefdom) or otherwise, there is no reason to expect that Chevron could get a fair shake in Correa country.
Petroecuador is Ecuador’s State oil company. Although Chevron has never operated in Ecuador, Texaco—for whose pollution the Ecuadorian courts now seek to hold Chevron liable—ceased drilling in Lago Agrio over 20 years ago. Only Petroecuador has continued operation in Lago Agrio since then. Chevron argued before the Ecuadorian courts that any resulting environmental damage is the responsibility of Petroecuador, not Chevron. As the National Court opinion notes (p. 116), Petroecuador publicly admitted to 175 oil spills during the period from 2005 to 2008 alone.
Petroecuador, then, is an indispensable party to any fair resolution of the questions of who spilled what and when, and who should pay for any clean-up. Yet the National Court dismissed arguments that Chevron could not be saddled with responsibility for Petroecuador’s spills. The Court observed that the plaintiffs had sued only Chevron. Adjudicating Petroecuador’s responsibility in a case to which it was not party, said the Court, would violate Petroecuador’s rights to defense and due process.
The Court fortified this position by finding no need to prove that Chevron (or Texaco) caused any environmental harm. Strict liability applies to polluters in Ecuador, the Court ruled; hence no proof of causation of harm is needed. Whatever sense this might make in a single-polluter case, it is hardly sensible where a multinational company is ordered to pay for pollution most likely caused by a State enterprise.
The law, of course, is capable of reasonably resolving multi-party issues of pollution and causation. Such questions arise regularly in countries everywhere. Whatever the correct legal solution may be under Ecuadorian procedure, it cannot reasonably be to hold Chevron liable for Petroecuador’s spills.
But no matter: In what passes for high-stakes justice in Ecuador, the National Court could not even hint at liability for Petroecuador. The State oil company is Correa’s leading source of revenue. The judges know that they can be removed from the National Court as easily as they were installed.
In 1995 Texaco and Ecuador agreed that, in return for Texaco’s clean-up of its agreed share of pollution resulting from its prior joint venture with the Ecuadorian State oil company, Ecuador would release Texaco from liability for diffuse or collective damage to the environment. The International Arbitration Tribunal hearing Chevron’s claims against Ecuador recently ruled that, while the release does not preclude claims by third parties for individual harm, it does bar third party claims for diffuse harm, because at the time of the 1995 agreement, only the Ecuadorian State could assert diffuse claims, and hence it had power to give a full release. (First Partial Award on Track I, 17 September 2013, par. 108.)
The National Court reached an opposite conclusion. I have never taken a position on the right answer to this complicated question. It is noteworthy, however, that the Ecuadorian judges neither mentioned the arbitral award, nor squarely confronted its reasoning—although they must have been aware of both.
Neither the lengthy opinion of the National Court, nor the manner of selection of its judges, and in particular of the judge who authored its opinion in the case against Chevron, should commend themselves to outside observers. If there is to be a fair and reasonable judgment in the Lago Agrio case, it will have to come from adjudicators in some forum not beholden to Rafael Correa.